মাসিক আত-তাহরীক Question: Are the activities of the Newway Bangladesh (Pvt.) Ltd., the Destiny 2000 (Pvt.) Ltd halal?. Is the MLM (Multi Level Marketing) system through which they give customers' commission or profit halal?
Ans: Basically partnership or joint venture entrepreneurship is Halal in two ways. One is Musharakah (مشاركة) i.e. partnership business where profit is distributed according to the share of capital invested (Abu Dawood, Buloogul Maram, H/870; Naylul Awtar H/2334-35). Another is Mudarabah where one runs a business with other's capital. Here the profit is distributed according to the articles of contract they agreed upon. (Daraqutni, Muwattah, Buloogul Maram, H/895, Mouqoof Saheeh). The business in question (MLM) is different from these two forms of halal business.
We have analyzed the books The Index file, The Concept and Sales and Marketing Plan published by the company and data supplied by them. Also we have consulted the written opinions of the Professors of the Department of Marketing and Economics, Rajshahi University, Bangladesh and King Abdul Aziz University, Saudi Arabia in this regard. The relevant points are quoted as under:
i) The legal business is the trading activities of any legal product where there is the risk of profit or loss. But the MLM companies talk only about profit. There appears no element of risk or loss. So it is difficult to know whether it is a business concern or a purely profit earning agency.
ii) The question of interest (riba) in the business of MLM is avoided tactfully. Even if there is no interest in direct transactions it cannot be said emphatically that the MLM is not connected with interest based dealings.
iii) The subject of gambling through `inverse pyramid policy' is avoided here in an aggressive manner.
iv) In ordinary business the businessmen get commissions on the quantity they sell and they can return the unsold goods to the company. But in the MLM business, there is no such scope to return the unsold goods.
v) According to the purpose mentioned in The Index, it is claimed that there is no allurement to make new members. On the contrary every statement in it is full of allurement.
vi) Gambling is present here. It is such a type of `business' where the welfare of the people is neglected and the goods are used to attract new members. The new customers are given assurance to earn easy money beyond normal profit of the goods sold which is simply gambling.
It is found through investigation that the market prices of the goods are half the price charged by the MLM companies. Again there is no certainty that the goods will be of good quality. For example: in the package of Tk. 7,500/= (in the 1st group), according to the information supplied by them the breakdown is as follows: the price of the product is Tk. 3,500/=, service charge is Tk. 1,000/=, security cost Tk. 1,500/=, and distribution cost Tk. 1,500/=. Thus the company bags additional Tk. 4,000/= from a product valued at Tk. 3,500/= only. A portion of it is distributed to the customers at different stages as commision.
According to the Sales and Marketing Plan published by the Destiny in March 2008, their total marketing profit distribution amounts nearly to 88% (p.7). In p.16 of the plan, it is said that after crossing 12 stages if the first customer is given 5% commission by the company per week (supposing monthly sale at Tk.100/-) on the goods purchased by every customer, the customer will earn at least Tk.8,000/= per week. Thus they allure the people to attract them by offering the possibility of earning such huge sum of money as `profit'. But the Prophet (pbuh) has strictly prohibited such cheating (Muslim, Mishkat H/2854).
The Standing Committee of the National Research and Fatwa Directorate of Saudi Arabia has issued decree that all these kinds of dealings (pyramid scheme, Network Marketing or MLM etc) are haram because the purpose of this dealing is to earn commission by recruiting new members for the company, not to earn profit by selling quality goods. Customers are allured to earn a large profit in return to a specified sum. Any person will be allured by this large sum of profit from such low priced goods. Ultimately the company earns a huge profit through the chains of customers/distributors. In fact, the product marketed by such companies is merely a means of earning commission and profit. It is haram according to the Shariah for the following reasons:
1. Interest (Al-Riba): Both the two types of riba are involved in it i.e. riba al-fadhl (involving exchange of goods of the same type but of different quantity) and riba al-nasi’ah (involving deferred payment of a larger amount than would be paid if it were paid immediately). The product which the company sells is charged exorbitantly or handed over on a deferred date. The incumbent is not really interested in the goods; his actual motive is to get the commission.
2. Cheating (Al-Gharar): It is a kind of gharar (ambiguous transaction) that is forbidden in the Shariah, because the participant does not know whether he will be successful or not in finding the number of purchasers required. No matter how long the pyramid network marketing lasts, it must inevitably reach to an end, and when a person joins the pyramid he does not know whether he will be in the higher level and thus earn a profit or in the lower level and thus incur a loss. Fact is that most of the members of the netwark are cheated and incur loss except for the few at the top. This is the result of the ambiguous transactions. The Prophet (pbuh) strictly forbade any ambiguous transactions (Muslim).
3. Grasping others wealth in haram ways: The transactions of MLM involve consuming people’s wealth unlawfully because these sells benefit no one but the companies and some participants whom the company encourages with the aim of tricking others. This is what is forbidden in the Quran, where Allah says: لاَ تَأْكُلُواْ أَمْوَالَكُمْ بَيْنَكُمْ بِالْبَاطِلِ “O you who believe! Eat not up your property among yourselves unjustly” (Nisa: 29).
4. Deception, deprivation and obscurity: The transaction of MLM involves cheating, deceiving and tricking people by showing the product as if that is the purpose of the bussiness. But when that is not the case rather enticing them with the prospect of a large commission which people do not usually earn is the kind of deceit that is forbidden in the Shariah. The Prophet (pbuh) said: مَنْ غَشَّنَا فَلَيْسَ مَنَّا “Whoever deceives us is not one of us.” (Muslim, Mishkat, H/2854).
Some people claim that the transaction is a kind of agency or brokerage but that is not true. A broker receives commission in return for selling the product direct whereas in network marketing the company pays commision for marketing, not selling the product. The aim of the broker always remains selling a good, unlike network marketing where the real aim is to increase agents/distributors in number, not the product. A broker receives commission from the ordering company while in the MLM commission is realized from the purchasers. The difference between the two is quite clear. Some ascribes the transaction as a kind of gift. This is far from the reality. Even if one accepts that, not every gift is permitted according to the Shariah. For example a gift given to the creditor is riba (Bukhari, Mishkat H/2833; Lazna Daemah, Fatwa No- 22935, Dated- 14/03/1425 AH).
This type of network business is accused in many countries for their unjust price fixing and making of exaggerated earning. In March 2008, the American Federal Trade Commission removed names of MLM companies from its list of companies. The organization also warns that the practice of getting commissions from recruiting new members is prohibited in most countries of the world as is ‘pyramiding’, (Multi-Level Marketing –Wikipedia).
A lot of books and articles are written analyzing the weak theoretical basis of this type of marketing. It said, “MLM is like a train with no brakes and no driver headed full- throttle towards a station,”
The 'business' can also not be supported from the social point of view because it grows by exploiting people's relationships. A 'customer' is taught to market on his relatives and friends through persuasion motivated by allurement. As a result, the customer develops relationship with people with the concealed motive of developing his `bussiness'. He uses the intimacy with relatives and friends for his own 'business' purpose. The relation becomes unethical. Suspicion and narrow mindedness replace pure and simple friendship. The house becomes a market place. Any man with sound conscience simply will hate it.
Many people of the country are now actively engaged in this business leaving their respectable jobs provoked by easy money. It is a matter of great regret that even some Ulama of the country have fallen prey to this business. People are earning a good sum of money but their Islamic spirit is eroding. Pure materialistic attitude took firm place in their heart. The teachings of Islam is to spend wealth in the cause of Allah while materialistic philosophy asks to amass wealth as much as one can which makes him the shadow of Qaroon. The Prophet (pbuh) says,
اَلْحَلاَلُ بَيِّنٌ وَالْحَرَامُ بَيِّنٌ، وَبَيْنَهُمَا مُشْتَبِهَاتٌ لاَيَعْلَمُهُنَّ كَثِيْرٌ مِنَ النَّاسِ، فَمَنِ اتَّقَى الشُّبْهَاتِ اِسْتَبْرَأَ لِدِيْنِهِ وَعِرْضِهِ، وَمَنْ وَقَعَ فِى الشُّبْهَاتِ وَقَعَ فِى الْحَرَامِ-
“What is lawful (halal) is clear and what is unlawful (haram) is also clear, and in between them are the things doubtful which many people do not know. So he who guards against doubtful things keeps his religion and honour pure, and he who indulges in doubtful things indulges in fact in unlawful things” (Bukhari, Muslim, Mishkat, H/2762).
There is another Hadeeth, دَعْ مَا يُرِيْبُكَ إِلَى مَا لاَ يُرِيْبُكَ، فَإِنَّ الصِّدْقَ طُمَأْنِيْنَةٌ، وَإِنَّ الْكَذِبَ رِيْبَةٌ، “Leave what is doubtful and move towards undoubtful things because peace and tranquility lies in the truth and vagueness and uncertainty is in the false” (Ahmad, Tirmizi, Nasaee, Mishkat, H/2773).
Therefore, the explicit conclusion is that MLM business, be it by any name and brand (even if the products they offer vary) is not halal in the light of the Shariah. People who have a longing for the Heaven should remain far away from these mischievous and harmful business and their haram or doubtful income.
